ctp6360 said:Happytrader that last post of yours is pure brilliance and corroborates everything I have been reading lately, thankyou very much for your insight - it is great to hear from someone who has APPLIED these techniques...
The fundamentalist studies the cause of market movement, while the technician studies the effect.
wayneL said:
TheAnalyst said:Lets have a worked example on the subject while we are here....lets look at MBL and RIO....how do you people think the share price of RIO will react today considering it seems as though it may have priced itself ahead before the full year earnings report came out and its price was reacting more aggressively bullish than say MLB. I was in both trades over a week ago i made money out of RIO but lost on MLB installment warrants...I chose to jump off RIO two or three days ago and take a almost 20% profit in a week and took a 15% loss on MLB in about a week and a half......fundamentals were what drove me into both stocks and the fundamentals were what drove the dynamics of the share price.
Nick Radge said:Letting a loss run does two damaging things:
(1) It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. Your mind will do everything it can to keep you in a bad trade and get you out of a good trade. Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will never go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a trading perspective, holding these beyond reasonable risk will take you out of the game.
Nick
Amen.Nick Radge said:Your mind will do everything it can to keep you in a bad trade and get you out of a good trade.
Nick,Nick Radge said:Julia,
I operate several accounts and styles, so I'll address what I tend to do and offer a sugestion for your dilemma.
My superfund is strictly buy and hold. I am an accumulator of quality and my time frame is 20-years+. I focus on a stock and with each salary sacrifice I buy some. If it moves too far in my favour, then I focus on another one. And the process goes on. I tend not to add if they go up sharply unless they show siginificant long term potential. An example is IVC which I started buying at $2.25. Once it got past $2.75 I stopped, then decided the upside was much more. If it dips below $3.50 again then I'll step back up. A key component I look at is the total shareholder return over the last 10-years (although IVC hasn't been around that long). I will only exit a position if the company stops paying a dividend or I think they will go under. PBB was one I exited because I thought/think there may be a risk of them going under.
With trading, I use a different entity and a different game plan. When my stop is hit - I'm out. No second thoughts. No adjustments. No if's or but's. I'm out. I can always re-enter if prices start moving in my direction again. You always have that choice. Letting a loss run does two damaging things:
(1) It obviously skews the win/loss ratio the wrong way. You must remember that trading is about capital gain, not income growth. You never put your capital at more risk than is acceptable. Your mind will do everything it can to keep you in a bad trade and get you out of a good trade. Discipline is the core ingredient and there is no harm in having another go if prices go back again. But after 20-years of trading you will learn that sometimes prices will never go back. Look at MGW, PPX, PBG, IIN, WYL, PBB etc etc. These are top quality companies that kept diving and diving. I haven't even suggested HIH, ION, SGW, ONE, etc etc. From a trading perspective, holding these beyond reasonable risk will take you out of the game.
(2) Allowing a bad trade to go further than your anticipated stop, then seeing it come back will create negative reinforcement. Do it once, and becomes easier the second time and so on. One day, it just won't happen again and you're out of the game. The sub-consious psychological damage will eventually harm you.
Bottom line: set the stop BEFORE you enter the trade and never, ever amend it backward. You can always re-enter. The market will always offer opportunities. Why do damage to precious capital for the sake of ego?
Nick
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